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As Goldman Sachs analysts have explained, one of the main factors to foster gold price’s further rise is concern over the US dollar’s global standing as a reserve currency.
Amid the rapid growth of gold price and the unstable position of the U.S. dollar, investment banking giant Goldman Sachs Group Inc (NYSE: GS) has made a thought-provoking statement about short- and long-term prospects of the precious metal. According to Goldman Sachs, the gold price will reach as much as $2,300 per ounce in 2022.
Besides, the bank believes that by that time, gold will become strong enough to eclipse the U.S. dollar as a reserve currency.
Gold Climbing to New Highs
In July, gold rallied to over $1,900 per ounce, having grown by 29% since the beginning of 2020. Goldman Sachs analysts believe there is still room for at least 20% further growth. According to the bank, gold will jump from its already record level of $1,931 to reach $2,300 in the next 12 months.
Goldman Sachs said:
“With more downside expected in US real interest rates, we are once again reiterating our long gold recommendation from March and are raising our 12-month gold and silver price forecasts to $2300/toz and $30/toz respectively from $2000/toz and $22/toz.”
As Goldman Sachs analysts have explained, one of the main factors to foster gold price’s further rise is concern over the US dollar’s global standing as a reserve currency.
They stated:
“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows. There are real concerns around the longevity of the U.S. dollar as a reserve currency.”
Besides, Goldman Sachs is expecting gold to replace the US dollar as a reserve currency, as under the conditions given, gold is a much safer asset to invest in.
The bank’s leading strategist Jeffrey Currie explained:
“Today the risk is from debasement of fiat currencies that sows the risk for inflation, and gold is the best hedge against debasement.”
Currently, gold is trading at $1,973.44 per ounce.
What about Bitcoin?
For many, digital currencies look more attractive investment than gold. Therefore, a question arises whether Bitcoin (BTC) is a better hedge against inflation than the precious metal. Bitcoin has significantly grown since January 2020 and had a stronger negative correlation with the dollar than gold since March.
At the moment of writing, Bitcoin is trading at $11,165. Analysts are positive about the currency’s future. For example, Barry Silbert, the CEO of Grayscale and major crypto VC firm DCG, expects the next resistance for Bitcoin to hover around $13,000. Bloomberg’s mid-year report hinted that the price of Bitcoin could soon rise above $12,000.
Daria is an economic student interested in the development of modern technologies. She is eager to know as much as possible about cryptos as she believes they can change our view on finance and the world in general.
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